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Wages, from the bottom up

From an editorial Monday in the New York Times:

President Barack Obama was right about the need to increase the federal minimum wage, but it was too bad that he pulled his punches in calling on Congress to lift the wage only to $9 an hour by the end of 2015, from $7.25 an hour, where it has been since 2009.

His proposal would boost the annual pay of an employee working full time at the minimum wage from $14,500 now to $18,000, which is still very low. Several economic measures – including purchasing power, average wages and productivity gains – indicate that the minimum wage should be at least $10 an hour today, not $9 an hour three years from now. In 2008, Obama campaigned on raising the minimum wage to $9.50 an hour.

Politically, the lowball proposal is understandable. Congressional Republicans are bound to oppose any increase, a stance that will very likely further alienate important constituencies from the Republican Party, including women, who represent more than half of the estimated 18 million people currently working at or near the minimum wage.

Combined with tax credits for the working poor, Obama’s proposal could lift a minimum-wage worker who is currently below the poverty line ($18,498 for a family of three in 2012) out of poverty. But the minimum wage is more than an anti-poverty program. In fact, most workers at or near the minimum wage live in households with moderate family incomes above poverty levels but below the national median of roughly $60,000. For them, and for the broader economy, an adequate minimum wage can help ensure fair pay and stimulate the economy.

Opponents of an increase in the minimum wage argue that it will harm small businesses, but that fear is exaggerated. Research shows that the extra cost is offset by lower labor turnover, small price increases or other adjustments. Overall, the argument that a higher wage will kill jobs has been debunked by a range of studies showing that a higher minimum wage boosts pay without measurably reducing employment, while improving productivity.

A higher minimum wage would be good for workers and for the economy. The challenge is to get it through Congress.

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